Modern Banking System Study of NCC Bank Limited.

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“Modern Banking System Study of NCC Bank Limited.”

1.1. Background of the Study

Now a day, it has become essential for every person to have some idea on the bank and banking procedure. As our educational system predominantly text based, inclusion of practical orientation program is an exception to the norm. From practical knowledge, we will be able to know real life situations and start a career with some practical experience. In such state of affairs the present aiming at analyzing the experience of practical orientation related to an appraisal of NCC Bank Limited and my report topic has been selected as “Modern Banking System on the basis of NCC Bank Limited.”

Banking constitutes an important segment of the financial infrastructure of any country. Generally, banking means deposit mobilization and development of those deposits into advances or investments in different sectors. That’s means bank collect deposit at lowest possible interest and provide loan and opportunity at highest interest. Between the two interests is the profit for bank. There are two type of banking that was commercial banking and another is investment banking. Commercial bank rise fund by collecting deposits from customer and business that use to make loan and customer at high interest for maximize profit. NCC bank is one of the most popular and profitable commercial bank in Bangladesh.

1.4 Objectives of the Study

1.4.1 Primary objective

The primary objective of this report is to gather information and related data in order to combine them based on the report Name “Modern Banking System on the basis of NCC Bank Limited”

1.4.2 Secondary objectives

The study was conducted to achieve the following secondary objectives-

· To review how NCC Bank perform their activities.

· To know the products and services offered by NCCBL.

· To get through all the departments of the bank and observe the actual work done

· To see how the loans and advances are provided to the borrowers

· To acquire knowledge about the foreign exchange system of the bank

1.5 Methodology of the Study

In this study, exploratory research was undertaken to gain insights and understanding of the overall banking industry and also to determine some of the attributes of service quality in Banks. Data needed for conducting the study have been collected from the following sources:

1.5.1 Primary sources:

· Face-to-face conversation with the respective officers in the branch.

· Observation while working in different desks

· Informal discussion with professionals

· Study of different files of different section of the bank

· Some access to the database

· Informal conversation with the clients

1.5.2 Secondary sources:

Secondary sources are the permanent and printed sources of information. This are-

· Annual reports of NCCBL

· Desk report of related department

· Brochures of National Credit and Commerce Bank limited

· Different reference books

· Banker’s training book

· Unpublished data from the branch

· Study of related books, seminar paper, training papers, Publication of statements

· Internet was also used as a theoretical source of information.

1.6 Limitations of the Report

There are some limitations of the report and therefore it may lack some crucial data. In preparing the report I faced some problems, which are as follows:

· The main constrain of the study was insufficiency of information, which was required for the study. There are various information the bank employee can’t provide due to security and other corporate obligations.

· Due to time limitation many of the aspects could not be discussed in the present report. Learning all the functions within just 90 days is really tough.

· Since the bank personnel were very busy, they could not provide enough time.

· Lack of opportunity to visit the branches freely

2.1 Banking Industry

A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers with capital deficits to customers with capital surpluses.

Banking is generally a highly regulated industry, and government restrictions on financial activities by banks have varied over time and location. The current sets of global bank capital standards are called Basel II.

2.2 The Banking Industry in Bangladesh

The Banking Industry in Bangladesh is characterized by strict regulations and monitoring from the central governing body, The Bangladesh Bank. The chief concern is that currently there are far too many banks for the market to sustain. As a result the market will only accommodates those banks that can transpire as the most competitive and profitable ones in the future.

Currently, the major financial institutions under the banking system include:

· Bangladesh Bank

· Commercial Banks

· Islamic Banks

· Leasing Companies

· Finance Companies

Of these, there are 4 State Owned Commercial Banks (SCB), 5 government owned specialized banks, 30 domestic private banks, 9 foreign banks and 29 non-bank financial institutions currently operating in Bangladesh. Moreover, MRA has given license to 298 Micro-credit Organizations. The financial system also embraces insurance companies, stock exchanges and co-operative banks.

The range of banking products and financial services is also limited in scope. All local banks must maintain a 5% Cash Reserve Requirement (CRR), which is non-interest bearing & a 15% Statutory Liquidity Requirement (SLR). With the liberalization of markets, competition among the banking products & financials services seems to be growing more intense each day. In addition, the banking products offered in Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by the Central Bank. Competing through differentiation is increasingly difficult and other banks quickly duplicate any innovative banking service.

2.3 National Credit and Commerce Bank Ltd.

National Credit and Commerce Bank limited came to reality through the “National Credit Limited”. Prior to conversion into a scheduled commercial bank, National Credit Limited (NCL) was incorporated as an investment company on 18th November 1985. It made its journey on 25th November 1985 at its registered office and first branch at 7-8 Motijheel Commercial Area, Dhaka-1000 with initial authorized capital of Tk. 30 cores. It was mostly involved in collecting suitable resources and making profitable investments. But within a very short period of time this investment company turned into a scheduled commercial bank. It was turned into a bank because it faced many restrictions in both collection and disbursement of funds while it was operating as an investment company. While this turnover was going on all types of transactions were closed for about fourteen months from April 22nd, 1992. After that, with the permission from the government and Bangladesh Bank, NCL was converted in a full-fledged commercial bank and started its banking operation on 17th May 1993, in the name of National Credit and Commerce Bank Limited. It has been registered under the company act-1913, as a private commercial bank with paid up capital of Tk.39 cores to serve the nation along with 16 branches. However, NCCBL runs as per company rule, free from government intervention. Year 1994 & 1995 were the full operation year of the bank. During this period gave emphasis on considering the affairs of the institution as well as expansion of business work. During last 15 years if its operation NCCBL has acquired commendable reputation by providing sincere personalized service to its customers through a technology based environment.

2.4 Objectives of NCC Bank

The main objective is to maximize profit through customer satisfaction which very much reflects the idea of marketing concept. NCCBL has been ensuring maximum profit by providing best and improved customer service along with other corporate objectives mentioned below:

· To provide excellent customer service to its clients, so that they choose NCCBL first for their banking.

· Ensure high return on investment and services with different service products.

· Making profitable investment and grow in annual profit ma

· To remain as the market leader through diversification of business and automation of banking operations.

2.5 Corporate Vision

To become the Bank of choice in serving the Nation as a progressive and Socially Responsible financial institution by bringing credit & commerce together for profit and sustainable growth.

2.6 Corporate Mission

To mobilize financial resources from within and abroad to contribute to Agricultures, Industry & Socio-economic development of the country and to pay a catalytic role in the formation of capital

2.7 Hierarchy of NCC Bank Ltd.

A 25 member Board of Directors manages National Credit and Commerce Bank Limited. The Board of director for efficient operation of the bank forms a 19 member Executive Committee. Besides, a management Committee looks after the affairs of the bank. The chronology of the management of the NCCBL can be given as under:

Vice Chairman
Board of Director
Managing Director
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Senior Principal Officer
Senior Officer
Junior Officer

The Bank maintains transparency in its entire works. All decision of the Management comes through discussions in appropriate forum and required follow-ups are also made to see their effectiveness.

2.8 Hierarchy of NCCBL in Shymoli Branch

Manager (Senior Assistant Vice President)
Deputy Manager (Principal Officer)
Officer Grade-1
Probationary Officer
Junior Officer
Assistant Officer

4.1 Functions of NCC Bank Ltd.

The functions of the NCC Bank Ltd. are given here:

· Deposit

· Current Account

· Savings Bank Deposit Account

· Term Deposit Account

· Premium Term Deposit Account

· Special Savings Scheme

· Special Fixed Deposit Scheme

· Money Double Program

· Loans and Advance

· Working Capital Financing

· Commercial and Trade Financing

· Long Term (Capital) Financing

· House Building Financing

· Retail and Consumer Financing

· SME Financing

· Agricultural Financing

· Import and Export Financing

· Remittance

· Special Interest Rate on Savings and Term Deposits

· Wage Earners Welfare Deposit Pension Scheme

· Loans for Real Estate (Land Purchase and House Building/Renovation)

· Advance Against Regular Remittance

4.2 Deposit

The deposited amount and its trend tells how the bank is performing in the banking business and how much attractive the bank is to the general customers. The followings are the deposit condition of NCCBL in recent years.

Year Taka (In millions)
2005 21478
2006 28147
2007 34902
2008 46905
2009 53900

Source: Deposit condition of NCCBL in 2005-2009 yaers,


Deposit of the bank at the end of the year 2007 was Tk. 34901.77 million, which was more than deposit of 2006. From 1999 to 2002 the bank had a rising position but in 2003 it decreased. It happened due to increase competition in banking sector where the customers are going to the other banks. But in 2006 bank’s deposits increased than previous year. This happened because of increasing confidence of customer in NCCBL. This inspired people to make more and more deposit with NCCBL.

4.3 Special Deposit Scheme

NCC Bank is now offering various depository products for mobilizing the savings of the general people to get the deposit from the little saver portion of the country, NCC Bank has started few schemes which by this time gained high popularity among the depositors. To ensure risk free and profitable investment of limited income of majority of people and thereby provide maximum benefits, NCC Bank has launched following savings schemes:

· Special Saving Scheme (SSS)

· Special Fixed Deposit Scheme (SFDS)

· Special Saving Scheme (SSS)

Two types of Account can be opened under this scheme. One for term of 5 years and another for a term of 10 years. Rules for both the accounts shall be the same.

Monthly installments of deposit will be Tk.500/- and its multiple up to Tk.10,000/- only as mentioned below to be deposited every month during the entire period of the scheme as fixed at the time of opening the Account. Account may be opened for any installments but later on the same is not changeable.

The depositor(s) will be paid a fixed amount after expiry of the term as follows:

SL Monthly Installment (Taka) Amount to be paid after the maturity @ 12.10%
5 years 10 years
01 500/- 40,500/- 1,10,750/-
02 1000/- 81,000/- 2,21,500/-
03 1500/- 1,21,500/- 3,32,250/-
04 2000/- 1,62,000/- 4,43,000/-
05 2500/- 2,02,500/- 5,53,750/-
06 3000/- 2,43,000/- 6,64,500/-
07 3500/- 2,83,500/- 7,75,250/-
08 4000/- 3,24,000/- 8,86,000/-
09 4500/- 3,64,500/- 9,96,750/-
10 5000/- 4,05,000/- 11,07,500/-
11 10000/- 8,10,000/- 22,15,000/-

Source: Special Saving Scheme (SSS) department, NCC Bank ltd.

· Special Fixed Deposit Scheme (SFDS)

· Minimum Tk. 50,000/- or multiple amount is acceptable under this scheme.

· The duration of the scheme shall be 5 years after which depositors can take back the principal amount, if not renewed.

· The duration of time between deposit and payment of first profit must minimum one month.

Monthly interest will be given to the depositors against the deposited amount according to the following schedule:

Amount of Deposit (TK) Monthly Profit (TK)
50,000/- 500
1,00,000/- 1,000
2,00,000/- 2,000
3,00,000/- 3,000
4,00,000/- 4,000
5,00,000/- 5,000
6,00,000/- 6,000
7,00,000/- 7,000
8,00,000/- 8,000
9,00,00/- 9,000
10,00,000/- 10,000

Source: Special Fixed Deposit Scheme (SFDS) department, NCC Bank ltd.

4.4 Loans and Advances

National Credit and Commerce Bank Limited is a scheduled commercial bank. Through financial intermediation the bank seeks avenues for employment of its funds where: (a) there is a profit, (b) risk is minimal; and (c) the cost of administrating is low. While “profit motivation” remains the prime consideration for viable operation and growth of the bank, the bank would also respond adequately to the socio-economic objectives formulated by the Government from time to time for accelerating the pace of economic development of the country.

National Credit and Commerce Bank Limited is a new generation bank. It is committed to provide high quality financial services products to contribute to the growth of G.D.P of the country through stimulation trade and commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and over all sustainable socio-economic development of the country.

Like every other business activity banks are profit oriented and profit is the central point on which the entire business activity rotates. A bank invests its fund in many ways to earn income. The bulk of its income is derived from investment. Since major part of banks income is derived from credit and since the money credited by bank is customer’s fund, banks should follow a cautious policy and should landing principles in the matter of lending.

The bank will put reliance on market forces via increased inducement to savers to mobilize saving and via profitability potential to allowance funds to the users of such sectors of trade, commerce, and industries as are consistence with the socio-economic objectives of the nation. The free market economy policy of the Government of Bangladesh will indeed facilitate healthier and efficient lending activities of the bank.


· Loan.

· House Building Loan.

· Transport Loan.

· Project Loan.

· Loan under Consumer Finance scheme.

· Loan under Lease Finance Scheme.

· Secured Overdraft.

· Cash Credit (Pledge).

· Cash Credit (Hypothecation).

· Export Cash Credit.

· Bank Guarantee.

· Letter of Credit.

· Payment against Document.

· Loan against Imported Merchandise.

· Loan against Trust Receipt.

· Bank to Bank Letter of Credit.

· Accepted Bill for payment.

· Inland Bill Purchased.

· Local Documentary Bill Purchased.

· Foreign Documentary Bill for Collection.

· Forced Loan.

· Packing Credit.

· Foreign bank Guarantee.

· Foreign Bank Guarantee.

· Small Business Loan

· House Renovation Loan.

· Personal Loan.

· Festival Small Business Loan Scheme.

I) Loan Documentation Checklist


· Acceptance of the terms and conditions by the borrower

· BLA’s opinion

· Photographs

· NOC from prior charge holder on fixed and floating assets of the company

· NOC to create 2nd charge mortgage on the prior mortgaged property

· Personal Guarantee of acceptable person as per sanction letter

· letter of Hypothecation of stock, raw materials, Work in process and finished goods

· Letter of Authority on Tk.150 non judicial stamp paper to take insurance policy and renewal thereof to the debit of Loan Account/any other account of the client

· Confirmation letter from prior mortgagor that they will hold documents of property to be charged on 2nd mortgage with our bank, on our behalf even if liability of the client with them is fully adjusted and deliver the documents on redemption of charge thereon, to us only

· Registered Irrevocable General Power of Attorney duly confirmed by work entrusting authority to the effect that all checques/bills against the work orders/supply orders to be issued in the joint name of the bank account the client

· Income tax clearance certificate with latest income tax return submitted

· Copy of allotment letter and lease deed for lease hold property issued by the lessor

· Equitable mortgage deed/deed of agreement.

II) Types of loan

Some of these important loans are described in below:

Making advances is the primary function of a bank. A major portion of its funds is used for this purpose and this is also the major sources of bank’s income.

Loans are the right to receive payment or an obligation to make payment on demand or at some future time on account of the immediate transfer of goods (securities).

Loans are the largest asset item, which generally account for half to almost three-quarters of the total value of all banks assets. A bank’s account typically is broken down into several groups of similar type loans. The loan and advances made by the NCCBL can broadly be classified by following categories:-

· Continuous loan

· Demand loan

· Term loan

· Other Special Schemes

4.5 Continuous loan

These are those advances, which do not have any set schedule for drawing or disbursement but usually have a terminal date of full adjustment or repayment. Example: Cash Credit (CC), Over Draft (OD).

1) Cash Credit (CC)

Cash credit arrangements are usually made against the security of commodities hypothecated or pledged with the bank.

Cash Credit (Hypothecation):

This type of credit is allowed to the traders and industrial borrowers for promoting trade and commerce and industries. In case of Hypothecation the possession of goods is not given to the bank. The goods remain at the disposal and in the godowns of the borrower. The borrower furnishes periodical return of stock with the bank.

Cash Credit (Pledge):

Allowed for promoting trade, commerce and industries of the country against pledge of stock in trade under Bank’s control. In case of the pledge, the goods are placed in custody of the bank with its name on the godown where they are stored. The borrower has no right to deal with them.

2) Overdraft (OD)

Overdraft is an arrangement between a banker and its customer by which the letter is allowed to withdraw over his /her credit balance in the current account up to an agreed limit. This is only a temporary accommodation usually granted against securities. The borrower is permitted to draw and repay any number to times, provided the total amount drawn and not for the whole amount sanctioned.

A cash credit is differs from an overdraft in one respect. A cash credit is used for long term by businessmen in doing regular business whereas overdraft is made occasionally and for short duration.

There are two kinds of overdraft:-

· Secured overdraft

· Unsecured overdraft

· Secured overdraft

· Secured overdraft is loans which have collateral attached to them in the form of a lien. A lien is a monetary claim against a property to be fulfilled before repeat ownership can take place.

Secured overdraft dividend is into 2 forms. Those are:-

· Secured overdraft financial obligation (SOD-FO): Allowed against financial obligation (Like-FDR, SSS etc) for promotion of economic and business activities.

· Secured overdraft general (SOD General): Generally allowed to the traders for business promotion and economic activities. In case of SOD (General), bank keeps the land as collateral.

· Unsecured overdraft

Banks sometimes, grant unsecured overdraft for small amount to customers having current account with them. Such customers may be government employees with fixed income or traders. Unsecured overdrafts are permitted only where reliable source of funds are available to a borrower for repayment.

4.6 Demand loan

The loan which becomes payable after serving demand notice by the bank concerned are termed as Demand loan.

Example: LIM, LTR, PAD, Loan against Packing Credit, Loan against Investment etc.






In order to contribute to the development of the capital market of the country NCC bank extends credit facilities against pledge of shares, debentures, price bonds, treasury bills etc. to the individuals as well as to the member of DSE and CSE.

4.7 Term loan

Term loan has specific term for repayment as specified in the loan agreement. Term Loans may be of various types which is discussed in the below:


In case of loan general, a lump sum amount for a certain period is given as an agreed interest rate. The entire amount is paid within the validity by deposited installment each period as stated in the loan agreement. The interest rate is charged for the outstanding amount.


NCC Bank Ltd. Sanction two types of House Building Loan.

1) Residential.

2) Commercial.

Maximum size of loan:

Loan for amount exceeding Tk. 5.00 lac to the maximum of Tk.50.00 lac is considered under the Housing Loan Scheme. The repayment will be 5 year to 15 years including grace period.


· Interest @ 13.50% P.A. subject to change with market situation.

· No processing fee will be charged.

· Documentation charge: 1% of loan amount to be realized on acceptance of loan.

· Interest will be charged on monthly reducing balances after realization of monthly installments.

· 5% rebate will be allowed on total amount of interest charged at the time of final adjustment of an account wherein no break of chain in repayment of installments will occur.


NCC Bank has project loan scheme. Before investment in the project loan bank always assessed who isthe person behind the project, security of the loan, repayment status etc. Borrower has completed a feasibility report on the proposed project showing the objective of the project, target customer, details cost of the project etc. Branch has not any authority to sanction the project loan. They send the proposal to Head Office along with all necessary papers after assessing the feasibility of the project. Head Office then evaluates the proposal, if feasible then Head Office gives a sanction letter to the branch indication all terms and conditions of the loan. The branch then gives another sanction letter to the client.


Process of transport loan is more or less same as project loan. Borrower has to apply for the loan in the bank prescribed application form. In the application form borrower must mention which vehicle he wants to buy and what’s the quantity. Borrower also has to provide detail price list of the vehicle, insurance paper for each vehicle, possible repayment schedule of the loan, list of collateral, list of hypothecated securities and necessary other papers depend on clients and number of vehicles. After getting all necessary papers and field inspection branch makes a proposal for the loan and sends it to the Head Office. Head Office then again checks the necessary papers and does the field inspection. After inspection if Head Office thinks that for sanction of the loan they need more securities and papers, borrower has to provide these papers. Branch usually does not have any authority to sanction any amount of loan. Branch only recommends for sanctioning the loan. After getting sanction from Head Office, branch disburses the loan and monitors regularly whether the vehicle is purchased, is the quotation matches with the real one, vehicle is in the route and more importantly borrower repaying the installment regularly.


Fixed income employee’s of various firm or company need urgently financial assistance for the following purpose:

· Marriage purpose

· Education purpose

· Advance against salary

· Education Loan

· Travel Loan

Especially meet up this financing by own income source is very difficult for middle class people. To solving this problem NCCBL introduce Personal Loan Scheme for salaried Person.


The ownership of a House/Building/Flat comes from purchasing or by heir. Huge amounts of fund are needed at one time for repairing them to make suitable for live or for modernization or renovation. The owner’s faces difficult problems to invest their fund in these sectors. NCCBL trying to solve this difficult problem by introducing “House repairing/ Renovation Loan Scheme”


This is one of the innovative products of NCCBL. The main2 factor of this loan is this loan fully applicable for festival purpose and only for small businessman. The requirement of loan is not very high but which have beneficial effects for the small businessman who requires extra finance to stock the goods to cope with market demand especially during the festival time (Eid-ul-fitr, Eid-ul-Azha, and Durga Puza) to run their business smoothly. The disbursement/transaction procedure for festival small business loan shall be is re-cycling order and disbursement shall be stopped 15 days before the festival day and the disbursement shall start before 1 month of festival.

Necessary Documents for FSBLS:

· D.P. Note

· Letter of Arrangement

· Letter of Disbursement

· Letter of Guarantee

· Letter of authority to debit the account for loan installment, incidental and other bank charges

· Letter of hypothecation

· Up to date trade license


In our country or in the sub-continent culture religious festival is one of the biggest occasions for the whole year. No matter what the financial situation everyone just wants to involve in those occasion. So this is a big occasion for businessmen for their business purpose and also individual for the festival. Salaried person of our country cannot fulfill demand from their fixed income at the time of festival. During the festival they require to met up their expenses. In order to cater to such emergent needs of the service holders, NCCBL has introduced this new scheme.

Interest and other charges for this type of loan:

· Interest @ 15% P.A at quarterly rest, subject to change.

· Application Fees- Tk.100/-

4.8 Other Special Schemes

Consumer scheme:

The Scheme aims at improving the standard of living of the fixed income group. Under the scheme the clients may secure loan facilities at easy installment to procure household amenities.

Lease Finance:

An entrepreneur, under this scheme, may avail of the lease facilities to procure industrial machinery with easy repayment schedule. The clients also get special rebate in their income tax payment under the scheme.

Lease financing is one of the most convenient long term sources of acquiring capital machinery and equipment. It is a very popular scheme whereby a client is given the opportunity to have an exclusive right to use an asset, usually for an agreed period of time, against payment of rent. Of late, the lease finance has become very popular in almost all the countries of the world. An obvious advantage of the lease is to use an asset without having to buy it.

Micro Credit Financing:

To fulfill its commitment to pay a vital role in socio economic development of the country NCCBL has introduce a small and medium credit scheme for its customers. The objective of the scheme is:

· To encourage and develop medium and small entrepreneurs

· To provide credit with minimum complexity and

· To generate employment.

Under the scheme NCCBL is providing Loan:

· To meet working capital

· To purchase capital machinery and for expansion of business and

· For purchasing household durables

4.9 Credit and Debit Card Division

NCC Bank has launched Credit Card of VISA brand in August 2005, with access in local market. Credit card for international market is issued in later 2007. Procedure for obtaining credit card is given below:

Prescribed Application Form is available at:

a) Card Division of NCC Bank Head Office

b) All branches of NCC Bank.

Required Documents With Application Form:

The required documents very for service holder and for businessman. Such as:

a) Recent passport size Photograph (one copy).

b) Attested original salary certificate/pay slip.

c) Personal bank statement for the last 6 months.

d) TIN certificate.

e) Photocopy of valid passport (if any) first 6 pages/ Voter ID/ Driving license/ Office ID.

f) Photocopy of any utility bill.

g) Other Credit card statement (if any)

· Age Limit:

Principal card applicant must be over 21 years of age and 18 years for supplementary card applicant and the applicant should not be over 60 years. So, the age limit for principal cardholder is 21 to 60 years and for supplementary cardholder is 18 to 60 years.

· Minimum Income:

Minimum monthly income to apply is Tk.10, 000 for Classic card, Tk. 20,000 for Silver card and Tk. 30,000 for Gold card.

4.10 Clearing Section

In clearing section, Cheque, dividend warrant and other forms of financial instruments, which are easy for encashment, are received. The clearing departments send these instruments to the clearing House of the Bangladesh Bank for collection. As soon as cash is received the amount is deposited in the clients account. Collection of Cheque, drafts etc. on behalf of its customers is one of the basic functions of commercial bank. Clearing sends for mutual settlement of claims made in between member’s bank at an agreed time and placed in respect of instruments drawn on each other. Negotiable instrument law provides protection to a banker who collects a Cheque or a draft if the banker fulfills the following conditions:

· He collects the instrument for customer

· The instrument be crossed

· The acts in good faith and without any negligence

Types of clearing:

· Outward clearing:

Outward clearing means when a particular branch receives instruments drawn on other bank within the clearing zone and those instruments for collection through the clearing arrangement is considered as outward clearing for that particular branch.

· Inward clearing:

The bank provides the instruments to other bank through clearing house, which have been collected from different clients. It performs this kind of service for its clients without any charge or the remittance.

· OBC (outward bill collection):

If a party gives a Checque to a branch of NCCBL to collect money from a branch of other bank, which is not situated in the clearing house then NCCBL collects money through OBC. In case of OBC two ways exist to collect money from another bank.

4.11 Remittance Department

Remittance is significant part of the general banking. The bank receives and transfers various types of bills through the remittance within the country. Obviously the bank charges commission on the basis of bills amount. NCCBL remittances are safe, swift, inexpensive and simple.

There are two types of remittances:

· Local remittance

· Foreign remittance

· Local remittance:

Using DD, TT, MT and PO can send local remittance. Bank receives commission by providing these services.

Types of Local Remittance:

· Pay Order (PO)

· Demand Draft (DD)

· Telegraphic Transfer (TT)

· Mail Transfer (MT)

· Shanchay Patra (SP)

Pay Order (PO):

Pay order is an instrument that contains an order for payment to the payee only in case of local payment whether on behalf of the bank or its constitution. Unlike checque there is possibility of dishonoring Pay Order. NCCBL charge different amount of commission on the basis of Pay Order amount.

Demand Draft (DD):

By DD any person can send money from one branch to another branch of NCCBL. To send the money he/she must fill up the NCCBL’s prescribed form of DD and paid charge/ commission and receives DD block. The following information is included in the DD block:

· Name of the sender branch.

· Name and account of the party who receives the money.

· For security purpose a confidential test number are included in the DD block.

· Amount of money to be transferred.

· Name of receiver branch.

The sender sends this block to the receiver branch of DD. When this DD block is received by the receiver branch, the authorized officer of the receiver branch tests the DD confidential number and if the test number is proofed then he/she gives the money to the payee.

Telegraphic Transfer (TT):

· To send money urgently NCCBL may be requested for TT on payment of a nominal charge and telegram charge.

· Any person urgently sends money from one branch to another branch within NCCBL through TT.

· When a message of TT sends through phone from one branch to another branch in that time the message received by the authorized officer who has a right of power of attorney. After that, he/she fills up the TT form. Following things are included in the TT form:

· TT number

· TT test number

· Name and account number of the payee

· Power of attorney number of the sender and receiver of TT

· The amount to be transferred

· After fill up the TT form, he tests the number of TT. If he ensures through testing the test number then he credits the account of the payee. On the other hand, if the test number is not proved then he calls back to the sending branch of TT and request to send a new TT.

Mail Transfer (MT):

Money can be sent through mail transfer to anybody who has an account in any other branch of the same bank for this purpose the sender shall have to furnish the details like:

· The name of the beneficiary and his account number

· The amount to be transferred

· The name of the branch where the account is maintained

· Foreign remittance:

NCC Bank is the member of Money Gram and SWIFT networks. Using the services of this global network, non-resident Bangladesh nationals can send money from abroad to their home country within a few minutes without any risk. NCC Bank has also arrangement with foreign exchange companies like UAE Exchange Co., Redha –Al-Ansari Co.etc.

Foreign remittance:

Year 2005 2006 2007 2008 2009
Taka in Million 2492.30 3856 7443.50 12098 13392

Source: Foreign Remittance department, NCC Bank ltd(2005-2009).

Money Gram:

Money gram is represented in over 115countries and is available at more than 25,000 locations worldwide. In the USA alone Money Gram is available at more than 15,000 locations. Besides, in the UK Money Gram is available through 1700 Postal Branches and 500 Thomas Cook travel shops making is the UK’s largest money transfer network. Finally using the Money Gram service could not be simpler. All one has to do is to visit a conveniently situated Money Gram agent anywhere in the world and to hand over the money they want to send their relatives or friends along with the one-off transaction fee:

· Sender completes a “send” form and gets a receipt. Money Gram Agent gives a Ref. No. This has to be passed to the receiver.

· NCC Bank makes an enquiry on the Money Gram computer network to obtain authorization to pay recipient and recipient receives the fund.

Money Gram is one of the fastest ways to transfer money. Customers using Money Gram can send or receive money usually within 10 minutes from anywhere in the world.

Beside this customer can also get remittance from:

· X-press money

· AFX (AL-FARDEN Fast Reemit)

· Habib Qatar

· Placid Express

Another three kinds of money transfer process NCC Bank has:

· Telemoney (Arab National Bank)

· Dhaka Janata Express (Italy)

· First Solution (UK)

5.1 Introduction

Financial analysis is so much essential for each and every business institution as well as for the Banking institutions to assess their past financial performance and to identify the sources, where the necessary improvement is needed to perform better in the future and to meet the future challenges by taking effective business strategy. Financial analysis typically is associated with ratio analysis. Ratio analysis involves the methods of calculating and interpreting the financial ratios to analyze the firm’s relative financial performance. The main purpose of this analysis is to analyze and monitor the firm’s financial performance, so, that the interested parties (both the external and internal) can realize the firm’s actual performance easily and conveniently, which is so much essential for the parties. There are several ratios that help a particular analyst to analyze the past performance of a particular firm and to diagnose the various relevant variables, which are important for improving the future operation of that firm. The financial ratios, that are useful for analyzing the past financial performance of a financial institution, such as – Bank, can be divided into five broad categories for convenience and they are enumerated below ——–

· Liquidity Ratio.

· Operating Efficiency Ratio.

· Profitability ratio.

· Capital Ratio.

· Market Ratio

These five groups of financial ratios are used to analyze a particular firm’s past financial performance and to identify the sectors where the necessary improvement is needed to make the future performance of the firm far better than the past. It is also mentionable that there are three types of ratio comparison and they are

· Cross-Sectional Analysis: involves comparison of different firms’ ratios at the same point of time.

· Time Series Analysis: involves evaluates performance over time by observing the trend of a particular ratio.

· Combined Analysis: combines both the Cross-Sectional and Combined Analysis.

And in this section of the report I am going to evaluate the financial performance of the National Credit and Commerce Bank Ltd. over time by calculating and interpreting some common ratios. All the important ratios to analyze and evaluate the financial performance of the National Credit and Commerce Bank Ltd. are calculated and interpreted in the following pages:

5.2 Liquidity Ratio

It measures a firm’s ability to meet up or satisfy its short term obligations, as they become due. The commonly used liquidity ratios are —-

· Current Ratio

A measure of liquidity, calculated by dividing the current assets by current liabilities. It shows the level of current assets that a particular firm has against per Taka of current liabilities of that firm. So the equation becomes—

“Current ratio = Current Assets / Current Liabilities”

years 2005 2006 2007 2008 2009
Current Ratio 1.21 1.29 1.38 1.49 1.62

Source: Annual reports NCCBL.

Comments: The graph of Liquidity ratio of NCCBL is showing that NCC Bank is performing well. So we can say that NCC Bank is properly utilizing there currents assets by currents liabilities.

5.3 Operating Efficiency Ratio

The ratio measures a particular Bank’s operating efficiency, which is the Bank’s ability to serve its customers in the most effective way by using least amount of resources (such as time, cost etc.). The following ratios are widely used to measure a particular Bank’s operating efficiency:

· Operating Cost to Income Ratio

It measures a particular Bank’s operating efficiency by measuring the percent of the total operating income that the Bank spends to operate its daily activities. It is calculated as follows:

“Operating Cost to Income Ratio = Total Operating Cost/Total Operating Income”

Year 2005 2006 2007 2008 2009
Operating Cost

(In Million)

1914 2646 3489 5054 6195
Total operating Income (In Million) 2932 3913 5269 3317 4372
Operating Cost to Income Ratio 65.27% 67.62% 66.22% 152.37% 141.70%

Source: Annual Reports NCC Bank Ltd.


We know that this ratio measures the operating efficiency of a particular Bank my measuring the portion of the total operating costs relative to the total operating income of that Bank and the higher the ratio, the lower the operating efficiency and vice-versa. So, after observing the figure drawn above, It can be said that the efficiency of the Bank has not been able to minimize its operating costs during the time period between years of 2005 to 2009.It was fluctuating which is not a very good sign for the bank.

· Total Asset Turnover

Total Asset Turnover indicates the efficiency with which the firm uses its assets to produce operating income. It is calculated by using the following formula –

“Total Asset Turnover = Total Operating Income /Total Asset”

· Investment to Deposit Ratio

It shows the operating efficiency of a particular Bank in promoting its investment product by measuring the percentage of the total deposit disbursed by the Bank as loan & advance or as investment. The ratio is calculated as follows:

“Investment to Deposit Ratio = Total General Investment/Total Deposit”